NAFA Urges DOL to Withdraw 2023 Fiduciary Advice Proposal in Its Entirety

Comment Letter Outlines Proposed Rulemaking’s ‘Fatal Flaws’ and Potential Harm to Independent Producers, Carriers and Consumers

NAFA, the National Association for Fixed Annuities, submitted a letter in response to the Department of Labor’s request for comments regarding its Retirement Security Rule: Definition of an Investment Advice Fiduciary. This rulemaking package, which was introduced on Nov. 3, 2023, represents the Department’s fourth attempt at imposing a new fiduciary standard on investment advice, and is accompanied by significant amendments to existing PTEs. The comment letter details NAFA’s concerns regarding the Department’s new definition of persons who render investment advice as fiduciaries under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code, and its potentially harmful implications for insurance agents and financial professionals who sell fixed annuities.

Key points within NAFA’s letter include that:

• the proposal reflects a false assumption on the part of the Department that it holds the authority to comprehensively regulate standards of conduct applicable to broker-dealers, registered investment advisers, and insurance agents;
• the proposal jettisons the “primary basis” prong of the five-part test for determining fiduciary status as set forth in the Department’s longstanding 1975 regulation;
• the Department failed in its attempt to reconcile the Fifth Circuit’s Chamber decision by simply making all rollover transactions fiduciary in nature without regard to what type of services or product offerings an independent agent is providing a client;
• the proposed amendment of PTE 84-24 would overturn the settled expectations of the life insurance and annuity provider community – formed over a period of more than 40 years;
• the Department’s preference for PTE 2020-02, which is largely designed around a broker-dealer distribution model, ignores the fact that different segments of the industry are subject to differing bodies of law and regulatory oversight; and
• the proposal threatens to place unnecessary, administratively burdensome and risk-inducing requirements upon insurance carriers and independent producers, which could ultimately put many small businesses and entrepreneurs out of business, leaving a sea of retirement-nearing and retirement-ready individuals left without professional financial help.

Use the links below for complete details on NAFA’s position and most recent advocacy initiatives.